Commercial banks create credit by:
A) Printing money
B) Accepting deposits and lending
C) Issuing bonds
D) Raising taxes
Credit creation by banks increases:
A) Government spending
B) Money supply in the economy
C) Tax revenue
D) Foreign exchange reserves
Which of the following is a limitation on credit creation?
A) Cash reserve ratio
B) Increased public deposits
C) Bank profits
D) Digital banking
The process of credit creation is based on:
A) Multiple lending of the same deposit
B) Printing more currency notes
C) Foreign direct investment
D) Government policies
The formula for credit multiplier is:
A) 1 / Cash Reserve Ratio
B) 1 + Loan-to-Deposit Ratio
C) Total Deposits / Bank Loans
D) GDP / Money Supply
Higher cash reserve ratio (CRR) leads to:
A) Higher credit creation
B) Lower credit creation
C) No impact on credit
D) Increased bank profits
Credit creation mainly depends on:
A) Foreign exchange reserves
B) Public deposits
C) Government tax policies
D) Gold reserves
Which banking function helps in credit creation?
A) Accepting demand deposits
B) Issuing currency notes
C) Selling government bonds
D) Tax collection
Excess reserves with banks lead to:
A) More credit creation
B) Less credit creation
C) No impact on credit
D) Higher taxation
Which monetary tool is used to control credit creation?
A) Repo rate
B) Foreign exchange rate
C) Tax exemptions
D) Inflation index
When banks lend money, they create:
A) Currency notes
B) Deposits
C) Fiscal deficit
D) Foreign reserves
What happens when banks increase their lending?
A) Money supply increases
B) Money supply decreases
C) Interest rates increase
D) Inflation decreases
Which bank ratio directly affects credit creation?
A) Cash reserve ratio
B) Loan-to-GDP ratio
C) Tax-to-GDP ratio
D) Foreign reserve ratio
Credit creation is limited by:
A) Bank reserves
B) Government spending
C) Public sector employment
D) Exchange rates
What is the role of the central bank in credit creation?
A) Regulating money supply
B) Issuing loans
C) Increasing foreign investment
D) Printing currency directly for banks
Which type of deposits help in credit creation?
A) Fixed deposits
B) Demand deposits
C) Foreign currency deposits
D) Tax deposits
If the central bank increases the reserve requirement, credit creation will:
A) Increase
B) Decrease
C) Stay the same
D) Double immediately
The primary limitation of credit creation is:
A) Availability of gold reserves
B) Cash reserve ratio
C) Foreign investments
D) Bank advertising strategies
Which factor increases credit creation?
A) Low reserve ratio
B) High inflation
C) Government spending
D) Tax hikes
Which financial institution plays the biggest role in credit creation?
A) Central banks
B) Commercial banks
C) Insurance companies
D) Stock exchanges
Money multiplier is directly related to:
A) Reserve requirements
B) Government budgets
C) Taxation policies
D) Foreign aid
What happens when banks reduce lending?
A) Credit supply decreases
B) Money supply increases
C) Inflation rises
D) Government deficit increases
Which financial crisis was caused by excessive credit creation?
A) 2008 Global Financial Crisis
B) 1970s Oil Crisis
C) 1930s Great Depression
D) 2000 Dot-com Bubble
Which of the following affects the credit-creating capacity of banks?
A) Central bank policies
B) Weather conditions
C) Import tariffs
D) Population growth
Which economic factor can reduce credit creation?
A) High interest rates
B) Low GDP growth
C) Declining stock markets
D) Government deficits
An increase in credit creation can lead to:
A) Inflation
B) Deflation
C) Lower employment
D) Decrease in money supply
When a commercial bank gives a loan, it:
A) Creates new money
B) Reduces money supply
C) Increases central bank reserves
D) Lowers the inflation rate
What is the primary objective of credit creation?
A) Economic growth
B) Currency depreciation
C) Reducing bank profits
D) Stock market regulation
Credit creation is a function of:
A) Commercial banks
B) Non-banking finance companies
C) Insurance firms
D) Tax authorities
Banks lend money primarily to:
A) Increase economic activity
B) Raise tax revenue
C) Reduce inflation
D) Control interest rates
